Enhancing financial stability: the role of transparency - speech by Donald Kohn

In a speech delivered at the London School of Economics, Donald Kohn - External Member of the Financial Policy Committee – considers how greater transparency of both the financial system and policy makers can enhance financial stability.

Published on
06 September 2011

Donald Kohn says that the establishment of the Financial Policy Committee (FPC) brings an important macro-overview to the job of regulating the financial system. But he argues it is private decisions that will ultimately determine financial stability, despite the best efforts of regulators. In the build up to the crisis, badly informed private sector decisions resulted in financial instability. "A variety of risks were poorly understood, poorly managed, and badly priced", he says. "Institutions, markets, instruments, and the interactions in the financial system became more opaque in the years leading up to the crisis."

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